Commercial Litigation and Dispute Resolution Blog

Background

On June 21, 2018, Parliament’s Greenhouse Gas Pollution Pricing Act (the Act) came into force. The Act sought to mitigate climate change by applying minimum national pricing standards for greenhouse gas (GHG) emissions to listed provinces that had not adopted sufficiently stringent pricing mechanisms.[1] Part 1 imposed a fuel charge to 22 listed GHG-producing fuels. Part 2 established an output-based pricing system (OBPS) for GHG emissions by large industrial facilities. Facilities that exceeded applicable emissions limits were required to pay the OBPS charge.

The provinces of Saskatchewan, Ontario, and Alberta brought the question of the Act’s constitutionality to the respective provincial Courts of Appeal (the References), alleging that Parliament had exceeded the scope of its authority in legislating the Act. A majority of the Saskatchewan Court of Appeal and Ontario Court of Appeal found the Act constitutional under Parliament’s power to make laws for the peace, order, and good government (POGG) of Canada under its national concern branch. In contrast, a majority of the Alberta Court of Appeal found the Act unconstitutional.

Division of Powers Analysis

Sections 91 and 92 of the Canadian Constitution Act, 1867 distribute heads of power between the federal and provincial government respectively. Section 91 also gives Parliament the residuary POGG power. In a division of powers analysis, the court considers the issue of whether the law in question falls within the jurisdiction of Parliament or the provincial legislatures in a two-step test. First, the court will “characterize” the impugned law by identifying the pith and substance of the law (the dominant characteristic of the law)^[2] by examining the purpose and effects of the law. The court will then “classify” the law as falling within either a federal or provincial head of power.

National Concern Branch of Parliament’s POGG Power

There are three branches to Parliament’s POGG power: (1) the gap branch; (2) the emergency branch; and (3) the national concern branch. In all three References, the federal government argued that the national concern branch of POGG permitted it to enact the Act. The national concern branch applies to matters that did not exist at Confederation or to matters that were originally of a local or private nature in a province that have since become matters of national concern.^[3] In the leading case of R v Crown Zellerbach Canada Ltd., the Supreme Court of Canada established a two-part test for applying the national concern branch: (i) the matter must have a singleness, distinctiveness, and indivisibility that clearly distinguishes it from matters of provincial concern; and (ii) the matter must have a scale of impact on provincial jurisdiction that is reconcilable with the constitutional division of powers.^[4] In considering whether a matter had the requisite singleness, distinctiveness, or indivisibility, the court found it relevant to consider how a provincial failure to deal effectively with the intra-provincial aspects of the matter would affect extra-provincial interests (provincial inability test).^[5]

Saskatchewan Court of Appeal

The Majority of the Saskatchewan Court of Appeal held that the pith and substance of the Act was the establishment of “minimum national standards of price stringency for GHG emissions”.^[6] The matter was characterized as a matter of national concern under POGG; since GHG pricing was essential in the global effort to limit GHG emissions and reduce climate change, the Majority held that the matter had become of national concern. It was distinguishable from other enactments or provincial areas of responsibility, and the failure of individual provinces to deal with GHG pricing would negatively affect other provinces’ efforts to reduce GHG emissions through interprovincial carbon leakage and global efforts to respond to climate change.^[7]

The dissent held that the pith and substance of Part 1 of the Act was the imposition of a tax while the pith and substance of Part 2 was the regulation of industrial GHG emissions.^[8] Since the Act intruded into provincial heads of powers (affecting local economies and daily lives of residents), they found the Act was unconstitutional.

Ontario Court of Appeal

The Majority held that the pith and substance of the Act was “the establishment of minimum national standards to reduce GHG emissions”.^[9] They found that the matter was both a new matter that did not exist at Confederation and a matter that had since become a national concern given the consequences of climate change. Since GHGs were a distinct form of pollution that combined in the atmosphere without regard to the source of emissions or provincial boundaries in contributing to climate change, it was a matter of national concern. They also held that the matter of establishing minimum national standards had distinctly extra-provincial and international characteristics because the provinces could not establish minimum national standards on their own and could not compel other provinces to take steps to reduce GHG emissions.^[10] The Act was therefore constitutional under the national concern branch of Parliament’s POGG power. The concurring opinion agreed with the majority except for their broad characterization of the Act.

The dissent held that the pith and substance of the Act was the “regulation of GHG emissions”.^[11] While the dissent confirmed that the purpose of the Act was to reduce GHG emissions, it found that the effect of the Act was to impose charges on numerous consumers and intra-provincial economic endeavours, which were matters falling under provincial jurisdiction. Since recognizing federal authority over “GHG emissions” would constitute a “massive shift in lawmaking authority” away from provincial jurisdiction, the Act was unconstitutional.^[12]

Alberta Court of Appeal

Fraser CJA, writing for the majority, held that the pith and substance of the Act was the “regulation of GHG emissions”.^[13] She found that the purpose of the Act was to mitigate climate change through a GHG emissions pricing scheme. However, she found that the Act had the effect of conferring the Governor in Council with entirely subjective and open-ended discretion to intrude on provincial jurisdiction since GHGs affected virtually every aspect of daily life. She found that the mere fact that GHG emissions transcended provincial boundaries did not make their regulation an indivisible subject matter. She further found that Canada had failed to prove that the provincial approaches would jeopardize the successful operation of the Act in different parts of the country or that inaction by any province would cause any measurable harm to any other province. While she acknowledged that inaction by a province could undermine the effectiveness of another province’s efforts, she found that this was merely a reflection of legitimate political disagreement on policy matters. The concurring judgment of Wakeling JA agreed with the majority, adopting a different division of powers analysis. Feehan JA in dissent found the Act constitutional.

Going Forward

The Supreme Court of Canada was set to hear the Reference question from the decisions of the Ontario and Saskatchewan Courts of Appeal in March 2020, but that Hearing was adjourned due to the coronavirus pandemic. Because of the delay, Alberta may seek to have the Alberta Court of Appeal judgment directly before the Supreme Court of Canada as well.

The Supreme Court of Canada’s decision will be groundbreaking and will provide much needed guidance on climate change law and the national concern branch of POGG. Some points that the SCC will likely have to consider include:

• The majority of the Alberta Court of Appeal appeared to create a new requirement in finding that the national concern doctrine did not apply to matters that fell within the provinces’ exclusive jurisdiction; rather, only matters that fell within the provinces’ residuary power under s. 92(16) over matters of a local or private nature in a province were capable of being transformed into a matter of national concern.^[14]
• There is disagreement in prior jurisprudence in the national concern branch of POGG as to whether the identification of the source of pollution is determinative of whether there is a national concern. One side argued that a province has sole jurisdiction if the source of pollution is readily identifiable in a province and subject to provincial jurisdiction, even if that pollution transcends provincial boundaries, while the other side asserts that pollution transcending provincial boundaries (such as climate change, marine pollution) is a matter of national concern.
• The Court will have to decide whether characterization of the “pith and substance” drives the characterization of the “matter” meant to be of “national concern” in the POGG analysis.
• All the References agreed that the matter did not fall under the emergency branch of Parliament’s POGG power since such legislation could only be of a temporary nature. It would be interesting to see if the SCC broadens the scope of the national concern branch to encapsulate matters that may become emergencies in the future but that are not temporary in nature such as in the case of GHGs. 

If you have any questions about this Act, please contact a member of our Litigation  & Dispute Resolution Group. 

_{[1] Schedule 1 of the Act set out the listed provinces to which Parts 1 and 2 of the Act applied. Part 1 currently applies to Alberta, Saskatchewan, Ontario, New Brunswick, Manitoba, Nunavut, and Yukon. Part 2 currently applies to Saskatchewan, Ontario, New Brunswick, Manitoba, Prince Edward Island, Nunavut, and Yukon.}

_{[2] Peter Hogg, Constitutional Law of Canada (Scarborough: Carswell, 2007) at 15.5 [Hogg].}

_{[3] Ontario (Attorney General) v Canada (Attorney General), [1896] AC 348 at para 13; R v Crown Zellerbach Canada Ltd, [1988] 1 SCR 401 at para 33 [Zellerbach].}

_{[4] Zellerbach, supra note 3 at para 33.}

_{[5] Zellerbach, supra note 3 at para 33.}

_{[6] Richards CJ: Reference re Greenhouse Gas Pollution Pricing Act, 2019 SKCA 40 at para 125 [SK Reference].}

_{[7] SK Reference, supra note 7 at paras 151–157.}

_{[8] Ottenbreit and Caldwell JJA: SK Reference, supra note 7 at paras 265, 329, 333.}

_{[9] Strathy CJ: Reference re Greenhouse Gas Pollution Pricing Act, 2019 ONCA 544 at para 77 [ON Reference].}

_{[10] ON Reference, supra note 9 at paras 116–118.}

_{[11] Huscroft JA: ON Reference, supra note 9 at para 213.}

_{[12] ON Reference, supra note 9 at paras 227, 237.}

_{[13] Reference re Greenhouse Gas Pollution Pricing Act, 2020 ABCA 74 at para 211.}

_{[14] AB Reference, supra note 47 at paras 175–181.}